regulating the oil palm boom: assessing the effectiveness of
TRANSCRIPT
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Regulating the Oil Palm Boom: Assessing the Effectiveness of Environmental Governance Approaches to Agro-industrial Pollution in
Indonesia
John McCarthy Crawford School of Economics and Government
Australian National University Canberra ACT 0200, Australia
[email protected] Tel: + 61 2 6125 0494 Fax: + 61 2 6125 8448
Zahari Zen University of North Sumatra
Jl. Karya wisata I No. 18 Johor Medan 20219, Indonesia
[email protected] Tel:+62 61 7867531 Fax:+62 617866248
Law and Policy (forthcoming)
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Regulating the Oil Palm Boom: Assessing the Effectiveness of Environmental Governance Approaches to Agro-industrial Pollution
in Indonesia
Abstract The large environmental impacts associated with agro-industrial development in Indonesia are both striking and increasingly important, especially with increased demand for bio-fuels and the rapid extension of oil palm plantations. Recently Indonesia has also seen a series of transformations in the regulatory regime for pollution control with decentralization and a shift towards new environmental policy instruments. This paper considers the effectiveness of these new approaches, including the widely influential International Organization for Standardizations (ISO) 14001 series for environmental management systems and the Roundtable on Sustainable Palm Oil (RSPO) certification system. Despite the turn towards these new governance approaches, the underlying problems that have undermined bureaucratic regulation in the past continue to haunt attempts to make the sector more sustainable. Efforts to mitigate the increasingly large-scale pollution associated with agro-industrial development will need to be better crafted and combined to suit the characteristics of the industry concerned and to address the wider socio-economic and political realities within which problems are embedded and where any policy tool must be applied. Keywords: environmental assessment, governance, certification, pollution, oil palm, biofuels, rubber
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INTRODUCTION
The rise of agro-industrial pollution from plantations in Indonesia has
emerged amidst a series of transformations in the regulatory regime for
pollution control. Governance reforms have encompassed
decentralization of key areas of authority and responsibility pertinent to
environmental management to locally elected sub-national levels of
government. There has also been a shift towards more flexible,
performance based and co-operative mechanisms and policy tools that
reflects the wider popularity of market based policy instruments or “new
environmental policy instruments” (NEPI) (Jordan et al, 2003), such as the
widely influential International Organization for Standardizations (ISO)
14001 series for environmental management systems and the Roundtable
on Sustainable Palm Oil certification system. These later approaches are
based on the notion that self-regulation by corporations together with
market incentives can lead to effective environmental management while
minimizing external state-sponsored enforcement mechanisms (Falkner,
2003).
The popularity of these “softer and more flexible” approaches depends
upon “the theoretical assumption of a greater effectiveness and efficiency
of new environmental policy instruments” as compared to traditional
command and control approaches, an assumption which remains untested
(Tews et al 2002: 16). Through a discussion of the agro-industry sector in
North Sumatra, the historical centre of Indonesian agro-industry, this paper
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will consider the following questions: first, why has bureaucratic regulation
largely been seen to have failed in this context? Second, how effective
has the shift from regulatory to NEPI governance approaches been?
Third, what conclusions can we draw regarding policy to mitigate the large-
scale pollution and other environmental impacts associated with the
sector?
We examine the reasons for the intractable problems faced by
bureaucratic regulation in this area, arguing that the underlying problems
of underdeveloped state capacity and political accountability of state
officials continue to undermine regulatory approaches after
decentralisation. We also study the effectiveness of self-regulatory
approaches in the agro-industrial sector, discussing why self-regulatory
approaches are unlikely to work on their own. We conclude that, given the
encompassing set of problems facing attempts to mitigate the large-scale
pollution issues associated with the sector, policy needs to be better
crafted to suit the characteristics of the industries concerned and policy
tools need to be combined and integrated in order to address the wider
socio-economic realities within which problems are embedded and where
any policy tool must be applied.
Following a brief account of our research methodology, we will introduce
the plantation sector context before considering the dynamics leading to
pollution problems in the rubber and oil palm industries. The next section
will then consider State policy to deal with the problems and the causes of
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the difficulties facing bureaucratic regulation in this area. We then consider
the effectiveness of the shift from regulatory to governance approaches,
first considering decentralization and then the application of compliance-
orientated approaches to achieving sustainability.
Using qualitative research approaches, this paper sets out to understand
the complex socio-legal processes shaping the workings of regulatory
regime(s) for pollution control affecting agro-industrial development in
Indonesia. To begin, the researchers carried out over twenty semi-
structured and open ended interviews with key provincial and district
officials and members of provincial and district legislatures in North
Sumatra. Using the second author’s established networks within the
province derived from long-term engagement with this issue, the
researchers interviewed factory managers and key industry association
personnel during field visits to several oil palm and rubber factories. To
explore the perspectives of local communities living around rubber and oil
palm factories, the researchers carried out a series of visits to highly
polluted sites to find representatives of affected groups and to provide
them with the opportunity to identify key problems and to articulate their
concerns. This purposive sampling approach provided a contextualized
analysis of agro-industrial problems from different perspectives, allowing
for the emergence of a more nuanced, contextualized understanding of
causality and the processes shaping attempts to ameliorate the outcomes.
The research also involved analyzing key texts, including laws, newspaper
articles and agency reports. Following on from this field work, the authors
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participated in plenary sessions and round table discussions at the annual
meeting of the Round Table on Sustainable Palm Oil (RSPO). The
authors deepened their emergent understandings through informal
discussions with NGO representatives and company directors regarding
key aspects of the RSPO process.
RUBBER AND OIL PALM IN INDONESIA.
In the 19th century and early 20th century, Sumatra experienced a rubber
boom, as the tropical forests that once covered large areas of the island
were converted into plantations. In addition to the commercial plantation
sector, smallholders integrated rubber cultivation into swidden agricultural
systems. Since the 1980s the relative price of palm oil surpassed that of
rubber. Consequently, smallholder and large plantations began to shift to
oil palm production. In some respects this oil palm boom has replicated the
earlier rubber boom. By 2000 the total area of oil palm increased to about
3.2 million ha, before increasing to 6.6 million ha, effectively doubling
within10 years (Statistik Perkebunan Indonesia, 2001, 2007). From 2006
the government has developed new policies allocating large areas of land
to investors interested in planting new crops to boost bio-fuel production.
Prior to the sharp economic downturn of 2008-9, the market drove this oil
palm boom, as the price of crude palm oil increased 88 percent from
570US$ per metric ton at the beginning of 2007 to over 1440US$ per
metric ton in early March 2008.
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Plantations opened most of this forest through systematic burning, and
consequently the incidence of forest fire is closely associated with oil palm
development (Gellert 1998 ; Ewakker, 1999). In many areas of
Indonesia, oil palm development has often involved encroachment into
sensitive conservation forests. The plantation sector has also led to air
pollution and the accumulation of effluent in rivers, problems that continue
to affect the quality of life of local communities in areas with established
plantation industries. With large scale greenhouse gas (GHG) emissions
from land use change and deforestation associated with the opening of oil
palm plantations, Indonesia ranks third behind only USA and China in total
GHG emissions.1 As the Indonesian government has announced plans to
double the area of land planted with oil palm by 2011 by bringing another
seven million hectares of land under cultivation, oil palm expansion has
emerged as a critical environmental and political issue (World Bank, DFID
& PEACE, 2007).
From the early decades of the twentieth century, the rubber production
system had also led to a large amount of waste, with much of this ending
up in rivers.2 Large rubber plantations developed “latex concentrated” and
“ribbed smoked sheet” (RSS) rubber processing factories. In these
factories mishandling of chemicals affects waterways, leading to widely
reported problems such as fish toxicity and affecting human health .
Production from “crumb rubber factories” (CRF) leads to pollution on a
wider scale. It is widely known that smallholders add contaminants to
increase the weight of their product. This ensures that CRFs have to
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clean up dirty rubber by using a lengthy cleaning and milling processes,
even blending processed dirty rubber with clean rubber to reach the lowest
grade (SIR 20) (Zen 1999)Zen, 1999)3. As this process involves very high
water consumption, it creates a large amount of liquid and solid waste. As
CRFs generally lack effective wastewater treatment systems and have no
other place to dump solid waste, CRFs discharge effluent and solid wastes
into rivers. For the reason almost all CRFs associated with smallholders
are situated along rivers.
In contrast to the rubber blocks produced by farmers, oil palm fruit need to
be processed within 48 hours after being picked. As factories need to be
located alongside water sources, large numbers of oil palm factories have
opened along small rivers running through the rural landscape where they
deposit most of this waste. Consequently, as this rapid agro-industrial
development has extended into the countryside on such a large scale, so
has the classic problem of externalities.
Crude palm oil (CPO) production produces large amounts of waste. Many
factories have a capacity of 60 ton of fresh fruit bunches (FFB) per hour
and produce 1,200 cubic meters of effluent per day of liquid waste. This
level of liquid waste produces a biological oxygen demand (BOD) of
25.000 mg/L, a pollution load (15.000 kg BOD/day) equivalent to the
sewerage produced by a city of 75,000 people (Pamin, et.al. 1999). By
2007 Indonesia had 487 CPO factories with a capacity 25 million tons of
fresh fruit bunches (FFB) per hour (Statistik Dtjenbun 2008), a dramatic
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increase over ten years earlier when 204 CPO processing factories
amounted to a capacity of 8,074 ton FFB/hour (Ditjenbun, 1998).4 The
processing of oil palm fruit also creates a large amount of solid waste,
including empty fruit bunch, mesocarp fiber and palm oil shells. Large
plantations usually choose to burn empty fruit bunches (EFB) and
mesocarp fiber rather than utilizing it. Given the scale involved, this leads
to noxious odours and smoke pollution over wide areas. While some state
companies employ the shells of oil palm fruits to fill roads around the
plantation, most factories use the shells for internal combustion for
powering their boiling stations, producing an enormous amount of black
smoke and dust.
MITIGATING THE POLLUTION ISSUES ASSOCIATED WITH PALM OIL
AND RUBBER INDUSTRY: BUREAUCRATIC REGULATION.
Indonesian policy makers have developed a comprehensive and intricate
legal framework that provides for traditional, prescriptive forms of
bureaucratic regulation or “command and control” approaches. Regulators
have elaborated this framework over the 20 years since these
environmental laws were first put in place. This regulatory regime has had
positive effects, especially in asserting the illegitimacy and indeed illegality
of flagrant practices of pollution. However, there remain key shortfalls.5
To date, regulatory enforcement has yet to ensure effective compliance.
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Indeed, it is relatively unknown for a factory to be closed for infringing
these laws.6
Spatial planning and environmental impact assessment processes aim to
ensure that environmental principles are applied to the planning process
and to identify and to address the anticipated environmental effects of
activities. Spatial planning legislation provides that environmental and
conservation principles need to be taken into account before forest and
peat areas are allocated for conversion to plantations, for instance
providing that areas of peat beyond 3 meters in depth should be set aside
to protect the hydrology, prevent flooding and the destruction of special
ecological features characteristic of such areas. Yet, conversion of forest
land to oil palm has long formed a key element of regional development
strategies with economic interests tending to overwhelm environmental
considerations. In the absence of effective cross-sectoral coordination,
large scale changes to spatial plans have facilitated the large scale
conversion of forests, including areas of deep peat that should be
protected under the spatial planning law.7 Further, if spatial planning
principles were applied to agro-industrial development, industrial areas
would also be separate from residential areas.
In the case of rubber factories, these regulatory approaches arrived long
after the advent of rubber factories. Consequently, the government never
effectively applied the anticipatory principles found in spatial planning and
environmental assessment procedures to these rubber factories. Prior to
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the advent of an effective zoning system, cities grew to encompass
previously isolated crumb rubber factories. This is despite the noxious
odors that rubber processing inevitably produces. Furthermore, rather
than undertake an Environmental Impact Assessment (EIA or AMDAL in
Indonesian), industries that were already in operation when the legislation
was passed were able to delay compliance with this regulation. Crumb
Rubber Factories argued that they would be forced to close if the
regulations were applied because they lacked the space for developing
waste water plants, and effectively would have to relocate to comply with
the regulation. They also claimed that they lacked the capital to develop
effective environmental management facilities (Zen, 1999). As they were
labour intensive industries, they asserted, their closure would effect a large
number of people.
Indonesia’s EIA law provides for EIA commissions to be set up to evaluate
EIAs. A key challenge for the operation of these commissions has
involved finding personnel with the required knowledge and commitment to
evaluate the environmental issues, people free of conflicts of interests,
rather than those with interests in furthering careers or livelihoods.8 When
development orientated government agencies choose NGO
representatives to sit on EIA commissions, in the past they have tend to
choose representatives who will acquiesce to proposals. It is an open
secret among environmental agency (Bappedalda) officials that the
proponents typically pay ‘independent’ consultants or the EIA commission
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members to ensure the result they need (Zen, McCarthy and Barlow
2005).
Rather than ensuring “that environmental considerations are explicitly
addressed and incorporated into the development decision making
process” (IAIA, 1999), it has often been remarked that EIA too readily just
becomes a series of procedural and reporting hoops through which a
proponent has to jump (Kompas, 10/6/2008). A consultant with long
experience in the field agreed with this observation, arguing that the EIA
report often functions as a formality to fulfill the license requirements
necessitated by regulations. Comparing the contents of EIA documents
produced by different factories, he argued, demonstrates that frequently
the documents are almost the same, even though the factory location is
completely different in terms of environmental characteristics, pointing to
the practice of consultants “cutting and pasting” to reapply the same
format to new sites.9 Elsewhere in the developing world this “cook book”
approach to EIA has often ensured that the environmental assessment
process fails to achieve its potential benefits (Pretts, 1999: 5).
As discussed below, rather than performing a substantive environmental
function, these EIA documents form a key part of the defensive strategies
of industries facing environmental inspections. When inspectors come to
the factory, the factory operators show the waste treatment facilities and
the EIA documents which – together with payments – are used to satisfy
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the inspectors that the form, if not the substance, of environmental
regulations are being met.
The traditional regulatory approach involves, via an inspection procedure,
ascertaining whether specific technical standards for air, water and noise
pollution, odour and land degradation have been met by operators and,
where violations occur, setting in train a process of sanctioning. A key
problem here is that, as EIA commissions only evaluate a particular
proposed development, after a permit is granted the EIA commission is no
longer concerned with the implementation of the management plans to
minimize waste set out in the EIA report. While the local government
environmental agency, Bapedelda (now renamed the Badan Lingkungan
Hidup Daerah or BLHD), has a key role in the licensing (through the EIA
process), the power to rescind the operating license is with the sectoral
agencies who issued the license. In the plantation sector, both the
Departments of Industry and Trade (Dinas Perindustrian dan
Perdagangan) and the Plantation Agency (Dinas Perkebunan) have key
licensing responsibilities.10 According to an agreement between the
Industry and Trade Agency and the Plantation Agencies, the Plantation
Agency is the consent authority for rubber and palm oil plantations and
latex factories while the Industry and Trade Agency has primary
responsibility for POM and CRF.11 These sectoral agencies have a
primary interest in supporting development. They enjoy a high level of
discretionary authority regarding how regulations are implemented, and
they do not necessarily give appropriate consideration to environmental
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concerns when granting permits and licenses or in setting the conditions
attached to them (cf Young, 1999).
To ensure that environmental decision-making processes are better
informed and decisions more socially and environmentally acceptable,
international practice promotes democratisation of EIA decision making
through public participation processes. In line with international EIA
principles, during the post-1998 political reforms law makers amended
environmental impact assessment processes by improving participation
processes and making it mandatory to provide EIA information.12 Yet,
proponents tend to view public participation in the EIA as an additional
cost for obtaining consent for a proposal. While participating NGOs and
officials who support the project proponent readily obtain information, the
wider public obtains enjoys only limited access (World Bank, 2005). In
operational terms there are no effective mechanisms to ensure that the
public can obtain information regarding a project proposal for an industrial
activity. Too often proponents and the relevant consent authorities seem
to fear that economic goals cannot be achieved if there is effective public
scrutiny and effectively obstruct the legal or administrative channels that
are formally available (Young, 1999). Consequently social control over the
implementation of EIA processes remains particularly weak.
Depending on the nature of the case, violating firms face administrative,
civil or criminal litigation.13 Officials appointed by the Attorney General’s
Department or directly by the districts and municipalities can carry out
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these investigatory functions. While these civil investigators have powers
to inspect and look into pollution cases without first obtaining permission
from the owners, the main difficult remains that the total number of
investigating officials is very small and not all districts and municipalities
have recruited such investigators.14 Further, as in other sectors, large
factories have considerable political and economic leverage, and bribery
and intimidation of regional officials attempting to enforce environmental
regulations is not unknown (Nicholson, 2005; Lucas and Djati, 2007).
As an alternative to relying on the regulatory state, individuals harmed by
pollution can sue businesses for compensation for harm done, in the
process creating incentives for businesses to internalize environmental
costs and invest in pollution control.15 This approach depends upon the
capacity of victims of pollution to pursue justice through civil litigation. As
elsewhere in the world, justice is extremely expensive and access to court
is beyond the reach of people of low socio-economic status – those
typically most affected by pollution. In addition to these financial hurdles,
potential litigants face the challenge of providing consistent scientific
evidence about the pollution related damages and their causes. When
cases come to court they can fail for a variety of reasons including paucity
and inconsistency of evidence. For instance, an official noted that one
case failed because the government agency bringing the case could not
prove that the pollution was from a particular factory rather than factories
further upstream. Moreover, the officials concerned had failed to follow
strict legal protocols in gathering evidence.16
16
To overcome the barriers victims of pollution face bringing cases to court,
article 39 of the environmental law (23/1997) incorporated the principle of
strict liability whereby the burden of proof should lie with the company
responsible for the waste rather than the people who suffer the impact. As
there are no implementing regulations in this respect, the principle has
never been operationalized (Nicholson, 2005).17 Accordingly, although
legislation gives basic rights to people affected by pollution, this does not
readily translate into effective procedural rights. To be sure there has
been a marked increase in the successful use of litigation as a means of
enforcing environmental rights since the end of the authoritarian New
Order. Nevertheless, problems with the “substantive legal framework, the
institutional resources of litigants, the independence of the judiciary and
the wider socio-political context”, as well as well as corruption continue to
make it difficult for local victims of pollution to use environmental law to
process a claim for compensation or remedial action (Nicholson, 2005:
269).
To minimize the costs of pollution control, as noted earlier, a firm can
engage in corruption, a pervasive problem that is closely linked to the
institutional context in which regulatory practices are embedded. For
instance, the complex web of laws pertaining to the environment clouds
the rights and obligations of proponents and the public, creating a lack of
clarity. This uncertainty potentially increases the perception of difficulty
and cost, thereby enhancing the opportunity for officials “to exert
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illegitimate discretion and favoritism in making their decisions” (Young
1999: 175). Further, the implementation of regulations characteristically
depends on the discretion of low level officials from regulatory agencies.
Officials working at the "shop floor" need to cooperate closely with industry
and over time develop close relations with their "clientele". In the course
of business, officials may well negotiate compliance rather than strictly
enforce the law. As interviews with industry managers engaged in hosting
official inspections revealed, during negotiations behind closed doors,
officials and their industry clients tend to come to arrangements involving
exchanges of money and favours. As far as government agencies are then
"captured" by industry interests, this constitutes a significant obstacle to
law enforcement. As a Regional Plantation Office (Dinas Perkebunan)
official noted, unless they have the status of civil investigators, officials
wishing to inspect a factory do not even have automatic access, but rather
need to ask permission before entering a factory to monitor pollution
problems. As he observe, factories can refuse access, or delay access to
a convenient time. In gaining access to factories, it is important for
officials to maintain good working relations with factory managers so that
things can go smoothly. This dependence can make it difficult for
inspectors to recommend harsh actions. Although collusive relations can
take subtle forms, they often take a more blatant form. In the course of this
research, the authors heard several unconfirmed allegations of senior staff
in government agencies both in the province and in district/municipal
governments taking bribes and misusing public funds. As we will discuss
later, this problem has continued with regional autonomy, where the
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operation of district-level social fields continues to distort law enforcement.
As a result, local people are cynical about government efforts to mitigate
pollution.
Governments agencies require considerable political commitment and
support to deal with pollution problems. Yet, for a number of reasons, a
political bias affects government agencies, leading them to avoid policies
that may affect the competitiveness of industry and lead to political
problems. Polluting industries create a lot of jobs. Interviewed workers
living around CRF and POM and dependent upon factories for their
livelihood stated that they were prepared to stand up for their factories,
even though the factory clearly produced significant environmental
problems. If a government agency were to act against a factory, the
factory can mobilize staff to sign petitions and demonstrate outside
government offices. Where rubber and palm oil industries cultivate
political leverage through financial and political connections to specific
government actors and elected officials, they can also threaten to withdraw
their political investments. Furthermore, local industries – such as POM
and CRF – contribute to local government revenue (PAD), and local
government has an interest in their continued profitability. Moreover, local
governments are eager to attract new industries and are afraid to
discourage investors in any way. All these considerations mean that
government agencies are reluctant to act against industries even though
the legal norms – including specific sanctions for transgressions – "are
complete".18 These disincentives for agencies considering the application
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of sanctions remain strong after regional autonomy, as district and
municipal governments continue to be reluctant to demand that new
factories have expensive pollution treatment facilities. If regional
government demands tighter pollution management, investment costs will
increase, and the fear is that this will discourage investment in a district.19
Despite the profitability of oil palm and rubber production, in addition to the
threat of harsh sanctions enterprises will need considerable incentives if
they are to invest in pollution mitigation, incentives that Indonesia’s
traditional regulatory approaches have yet to provide. For instance,
according to one industry source, if a financier invests in just a palm oil
mill, they will have their capital investment returned in two to three years,
and henceforth the POM will generate lucrative earnings 20 Given the high
volume of liquid wastes (see above), POM require large waste water
treatment facilities, involving considerable investments. According to an
engineer from one factory interviewed during this research, cleaner
production increases the efficiency of palm oil extraction in the production
process while reducing the amount of waste water. However, he said,
speaking of his factory, "the management is economical (hemat), they
consider investing in the technology for better waste management as
extravagant, while from our perspective [ie as an engineer] it would
increase efficiency."21 In other words, companies tend to see waste
treatment as an external cost and do not wish to internalize it. Up to now,
regulations have failed to compel them to change this attitude. Smoke
stack technology that reduces the impact of smoke emissions from POM is
20
also available, but POM have considered this too expensive to purchase
and to maintain, especially if this does not clearly add economic value to
production.22
PROBLEMS RELATING TO DECENTRALIZING ENVIRONMENTAL
MONITORING AND CONTROL FUNCTIONS.
Over the 1990s the shift in perspective towards governance has entailed
reworking the role of the state. Generally this has involved
decentralization, which, as one commentator argued, has become “the
sine qua non of public sector reform in developing countries" (Edmiston
2002). The assumption here is that if authority is delegated to local
agencies that are locally accountable, this will result in responsiveness to
local concerns and priorities. It is envisaged that local agencies are more
responsive to local concerns and priorities provided that they are held
accountable by local constituencies.23 Further, they are closer to the
problem compared with a central government agency with limited staff and
resources, and hence they may have more local capacity to deal with the
issue. In theory at least then, it has been asserted by those supporting
decentralization that these changes will increase democracy and lead to
greater participation, and effectiveness and responsiveness for local
government (Frerks and Otto 1996; EPIQ Technical Advisory Group 2001:
122).
In Indonesia, the major framework law on decentralization (UU No
22/1999; later UU/32/2004) specified that the management for
21
environmental concerns is primary responsibility of the autonomous
districts/municipalities.24 The laws provided districts and municipal
governments with extensive discretionary powers while the central
government only retained powers over setting policy, guidelines and
standards. In effect, the districts and municipal governments now have
most of the responsibilities for environmental management and monitoring.
In 1999 a new regulation (PP 27/99; later PP 38/2007) granted
districts/municipalities the key responsibilities for evaluating EIA reports.
Subsequently, a Bupati or city mayor can arrange their own EIA evaluation
of a project within their administrative boundary.25 The provincial
Bapedalda agency is now responsible merely for environmental problems
with impacts across more than one district.26
The delegation of authority to district offices offers some advantages.
After the establishment of the Environmental Control Agency at the
provincial level (BAPEDALDA) in 1998, this agency faced significant
problems carrying out its mandate due to the lack of staff and resources it
had compared to the size of its jurisdiction. In comparison, after regional
autonomy, in time each district will have staff dedicated to environmental
problems. Moreover, in theory at least, following regional autonomy the
district government can make decisions in the community interest directly
without waiting for directions from above and without working through a
long bureaucracy.
22
During the transition to regional autonomy several problems have
emerged.27 First, the decentralization process has left the respective areas
of authority of different agencies unclear. A second set of problems
emerged when districts set up new Bapedalda agencies. In some cases
district and municipal governments have often given responsibility for
environmental protection functions to officials with insufficient status.
When lower echelon officials have responsibilities in environmental areas,
they are unable to coordinate or to control other agency heads with higher
echelon status. In other cases district governments have delegated
responsibility to inappropriate agencies with difference priorities which can
lead to sectoral conflicts of interest. The problem is that these agencies
are project-orientated rather than interested in mitigating environmental
issues.28 Alternatively, if environmental functions are delegated to an
existing district agency (dinas), this agency lacks a coordinating capacity
and hence will tend to deal with a narrow set of problems, such as treating
waste, rather than working to ensure environmental management is a
whole of government issue. 29 Third, district and municipal governments
are often incapable of providing proper resources and qualified staff to
new local agencies. Although there are now training programs, the
capacity of designated district civil servants to carry out investigations is
still weak, and civil servants at this level lack the required training. Fourth,
funding presents an exacting challenge for many districts. As a
consequence, Bapedalda in districts/municipalities often lack finance for
projects or programs and even perhaps sufficient funding for salaries. In
some cases the district governments seemed to be more interested in
23
raising revenue rather than waste mitigation.30 According to Rubber
Industry Association of Indonesia (Gapindo) officials, those implementing
the pollution regulations just come to factory and ask for payment without
making an effort to help the factory to manage or clean up the problem.31
Finally, while in theory regional autonomy should lead to greater
responsiveness to the needs and aspirations of local communities, the
issue of holding elected officials accountable remains unresolved .
Factory managers interviewed during this research complained that they
now receive more frequent visits from the police, district politicians,
journalists and NGOs, all seeking payments. In a similar fashion to district
and municipal agencies captured by business interests (see earlier),
regional assemblies (DPRD) tend to balance up carefully the
consequences of appearing either too responsive to local business
interests or acting in accordance with the complaints of local pollution
victims.
Manor (1999: 55) has argued that for decentralization experiments to
succeed, there are four crucial elements: decentralized authorities need to
have sufficient powers, resources and administrative capacities to
accomplish development objectives, and effective accountability
mechanisms need to be in place to ensure that elected politicians are held
responsible to local constituencies. As we have seen with respect to
environmental management there are many significant challenges in these
areas ensuring that state agencies face significant challenges in ensuring
24
pollution mitigation. District governments tend to lack the financial
resources to accomplish relevant tasks. In the context of endemic
budgetary problems, much district environmental related activities tends to
be aimed at generating revenue from every source rather than solving
critical pollution problems. With respect to the powers devolved to district
authorities, as we have seen, there is a lack of clarity regarding the
division of authority between local decentralized agencies and agencies of
the provincial and central governments. Furthermore, decentralized
agencies still need to develop administrative capacity – supported by
appropriate funding, and training – to carry out delegated functions.
To be sure enhanced public scrutiny, the quality of leadership within local
environmental authorizes, availability of technical expertise and high levels
of engagement from developers can raise the standard of environmental
governance, especially in key urban centers where such competencies
can be found. Over time legal-administrative problems may be addressed,
including by providing a clear elucidation of responsibilities and areas of
authority of different agencies and the provision of authority over
environmental affairs in autonomous districts/municipalities to appropriate
institutions. Yet, particularly in rural contexts, “persistent political,
institutional and resource related constraints” (World Bank, 2005) continue
to undermine state capacity in the absence of the transparency and
accountability mechanisms that might improve the governance standards
under decentralization. It seems unrealistic to expect regional autonomy
reforms to overcome all these accumulated problems in the short term. As
25
one official noted during the course of this research, "regional autonomy is
not a magic drug for all illnesses in the region: it all depends on the
circumstances in the region"32
NEW REGULATORY APPROACHES TO MITIGATING THE POLLUTION
ISSUES ASSOCIATED WITH AGRO-INDUSTRIAL DEVELOPMENT
Given the problems associated with traditional bureaucratic regulation and
the fashion for neo-liberal market based approaches, over the last twenty
years policy makers have increasingly turned to using other policy
instruments to provide incentives for achieving environmental standards.
In contrast to compulsory instruments that permit no room for private
discretion, governments may apply a range of "mixed instruments"
involving varying levels of state and private provision. The state may also
promote "voluntary instruments" and “incentive tools” that involve much
less state involvement (Howlett and Ramesh 1995). Business interests
have vigorously promoted self-regulatory approaches to environmental
management, a process that came to fruition when corporate and legal
experts from around the world drafted the global Environmental
Management System or ISO 14000 series (Falkner, 2003). With market
based approaches the underlying assumption is that environmental
governance can emerge as a natural outcome of the market process: if
markets regulate themselves, producers will incorporate environmental
concerns into their activities wherever consumers value environmental
sustainability. In other words, the price mechanism can establish the
26
optimal level of investment in environmental protection efforts. (Falkner,
2003; Rondinelli and Vastag 2000; Darnall et al., 2000).
Frustrated by the failure of legal instruments to work on their own, policy
makers in Indonesia’s State Ministry of the Environment have also turned
to alternative policy tools including market mechanisms, social controls,
and out of court settlements.33 Consequently there have been some
attempts at promoting self-regulation in this area. For instance, in the
early 1990s the government introduced a series of policies that aimed to
clean up the dirty rubber problem. At this time the State Ministry for
Environment had a Clean River Program (Prokasih) that aimed to reduce
pollution loads in river by 50% in two years. Under Prokasih, factories had
to sign agreements with the local government authority to comply with
government regulations on wastewater effluent standards. To support
Prokasih and to implement the national standards policy, the Indonesian
Rubber Processors and Traders Association (Gapkindo) initiated a new
clean rubber program.34 Under this program CRFs entered into
agreements with Gapkindo to stop purchasing contaminated rubber
coagula from smallholders. If factories failed to comply, Gapkindo would
give three written warning and then request the sectoral agency to cancel
the operating license of the non-compliant factory.
This policy was based on premise that "if no one buys dirty rubber, then no
one would produce it". The premise was supported by the fact that CRFs
monopolize the marketing of smallholder rubber. As raw rubber can only
27
be sold to them, if they refused to take dirty rubber, farmers would be
forced to only sell clean rubber. Gapkindo supported the program
because, as well as cleaning up the environment, removing the
contamination practices of smallholders would improve the physical and
chemical quality of rubber. Raising the quality of rubber exports would
also increase the export earnings from the rubber industry.
While in theory the logic of this approach was correct, reality proved to be
more complicated. The first problem was that rubber factories had excess
capacity and competed to buy rubber from smallholders. If one factory did
not comply, others would follow suit. This classic collective action problem
became the obstacle to implementing a demand-driven approach to
solving the problem. Second, Gapkindo depends upon CRFs for its
funding, and it was not in Gapkindo's interests to shut down non-compliant
CRFs. Gapkindo is an association of processors and traders, not an
enforcement agency, and to succeed this program would need the support
of effective bureaucratic regulation. Third, the clean rubber program did
not attempt to solve the problem of dirty rubber at the farm level: with
farmers still being paid according to the weight of rubber produced rather
than its quality, they continued to produce dirty rubber. Due to the failure
of this policy, the clean rubber program closed in 1996. Henceforth the
policies regarding clean rubber existed only on paper: they could not be
implemented because of the problems upstream in the rubber production
process.
28
Indonesia has also witnessed the application of another key self-regulation
approach – certification. Certification aims to enable the market to control
and to select products that comply with quality assurance and waste
management and at the same time offers greater incentives for industries
to meet environmental policy objectives. In a global market, products
bearing the appropriate stamp of certification – such as the International
Organization for Standardization (ISO) or the Round Table on Sustainable
Oil Palm (RSPO) – gain access to a wider market because, at a time of
greater environmental interest among consumers, consumers may choose
oil palm and rubber products that are known to be produced in accordance
with sustainability criteria.
Given that the reputation and ultimately the share price of transnational
corporations can be affected by public campaigns against their products,
public relations considerations provide considerable incentives for
corporate actors to sign up to and to implement voluntary schemes such
as RSPO. For instance, in 2008 Greenpeace engaged in a high profile
campaign against Unilever. Greenpeace held Unilever to be the world's
single largest buyer of oil palm products, arguing that Unilever suppliers
were destroying orangutan habitat and clearing Indonesia's peat lands and
rain forests, significantly contributing to greenhouse gas emissions
(Greenpeace, 2007, 2008). In buyer driven supply chains such as oil
palm, where suppliers wish to market their products to companies such as
Unilever, RSPO chain of custody requirements that attempt to ensure that
all actors in the supply chain comply with RSPO principles and criteria
29
have placed pressure on Unilever’s Indonesian oil palm producers to
comply to RSPO (Jakarta Post, 5/5/08).
Certification schemes such as RSPO build on earlier experience with
environmental management systems (EMS), which are simply systems
designed for moving information around an organization to help a business
make decisions that reduce its impact on the environment. In other words,
by allowing a business to “evaluate its environmental performance against
policy, objective and performance targets”, an EMS facilitates self-
regulation within the company (Melnyk et al. 2003: 333). We may readily
assume that a good EMS, if well implemented, will reduce negative
environmental impacts. However, a certified EMS only ensures that a firm
or plant meets ‘a process standard rather than a technical standard’
(Welch & Schreurs 2005: 78). A company’s EMS can meet ISO 14001
certification standards as long as it at least constitutes a system for
identifying and complying with existing regulatory standards. While there
is a great deal of discussion of ‘going beyond compliance’, there are no
sanctions for failing to show improvement: a certified EMS does not offer a
guarantee that environmental outcomes are better than regulatory
standards or indeed that the certified organization complies with a plant’s
or a firm’s voluntary goals (Welch & Schreurs 2005;Rondinelli and Vastag
2000). In other words, the ISO process certifies that a company’s
environmental management system meets baseline standards for an
environmental management system process; it does not set out to verify
the actual environmental performance of a plant or company beyond that
30
of meeting existing regulatory standards.35 Consequently, a certification
system such as the ISO (or indeed RSPO) may only provide a limited
means of ensuring environmental improvement has actually occurred
A key challenge is that of scale. ISO 9000 required standardization in
handling wastes and processing of raw rubber beginning from tapping
latex in the field, transportation, the processing of unrefined rubber in the
Crumb Rubber Factory and including the system of delivery to consumer
countries. In a similar fashion, ISO certification for oil palm (and later
RSPO certification) requires standardization from the beginning of FFB
harvest, transportation, processing of CPO and delivery to the consumer.
Consequently effective implementation of ISO and RSPO processes
require a coherent management system. The most viable application of
certification is on large estates where all activities (company policy,
planning, implementation, internal audit and corrective actions,
documentation and continual improvement) are under the control of the
single management of a company. If various certification processes are
integrated, they can be implemented in the same management system
without significant additional staff. As smallholding sources of unrefined
rubber and fresh fruit bunches depend on thousands of small-scale
growers that are not under a single management system, it is very difficult
for smallholders to meet ISO or RSPO standards. For certification to
succeed, CRFs and POMs buying from smallholders have to compel their
suppliers to contract to a quality assurance system which can meet the
requirements for ISO and/or RSPO.36 In this context, partnership between
31
smallholders and CRFs or POMs is seen as a key to creating a clean
production system in the future. A system of making smallholders comply
with this standard would add considerably to Indonesia’s ability to reach
global standards for trade. At present, ISO 14000, ISO 9000 series and
latterly RSPO criteria can only be applied to large rubber or palm oil
estates, although moves are afoot to trial the application of RSPO criteria
to smallholders.
RSPO is still developing an independent auditing capacity to ensure an
external means of verification that companies enlisted with the RSPO
meet the RSPO standards and criteria – not just for a once off audit – but
in a consistent manner. Developing an external auditing process and
ensuring that environmental criteria and met, raises all the issues of
compliance to environmental norms that state regulatory process have
failed to address.
In 2008 the first shipment of RSPO certified sustainable palm oil arrived in
Europe from Southeast Asia. Then in 2009, Musim Mas Group Plantations
“became the first company in Indonesia to demonstrate that some of its
plantations comply with the Roundtable for Sustainable Palm Oil (RSPO)
Principles and Criteria” (WWF, 2009). Yet, at present the RSPO
certification process does not guarantee sustainability. This became clear
in 2008 when Unilever admitted to Greenpeace that it was unable to trace
the origin of palm oil supplied by firms operating in Indonesia
(Greenpeace, 2008). Greenpeace leveled an accusation against Unilever
32
that through RSPO they were “green washing their brand”, effectively
reframing their activities in such a way to legitimate their model of
development (cf Lemos and Agrawal, 2006: 313). Nonetheless, with
global buyers from 140 countries asking for certification, the controversy
clearly provided greater cause for suppliers to become more rigorous in
the application of RSPO criteria and standards (mongabay.com 21/4/08;
News Straits Times, 09/07/2008)
As certification depends on a company's commitment to abide by
certification rules rather than comply with compulsory government policies,
it is a form of self-regulation that relies on peer and market pressure and
on management incentives to be effective.37 As other research indicates,
participation in voluntary international management standards (such as the
ISO series) can facilitate uptake of environmental management practices
(Delmas 2008). However, to date, the RSPO scheme has a highly uneven
uptake. Large corporate Malaysian actors have more rapidly adjusted to
the demands of importing countries (such as the EU) who insist on some
kind of guarantee that the palm oil comes from plantations and mills with
sustainable practices and demand some sort of certification for market
access. Due to years of involvement in certification and 10 years of audits
under ISO 14001, these corporations are better placed to deal with
pressures to conform with local laws and regulations, concerns with the
environment, occupational health and safety workers’ rights issues and
issues affecting the local communities, together with problems associated
with the agronomy and the ecology of oil palm plantations and milling.
33
(News Straits Times, 09/07/ 2008). However, at this early stage it
remains unclear whether, as one study of the impact of ISO processes on
industry found, application of the criteria will lead to the real reform of
practices rather than merely improvements that remain primarily technical
and administrative in nature (Boiral, 2007). In a similar fashion to
Gapkindo, RSPO is ultimately an association of producers: it remains to be
seen whether RSPO will prove more successful in regulating its own
members.
As with many other market focused instruments, certification relies upon
the internalization of environmental preferences by key stakeholders,
particularly consumers (Lemos and Agrawal, 2006). Some estimates
suggest that China imports almost fifty percent of global oil palm
production, with India also increasing its consumption (Ethical Corporation,
2008). As both these markets do not ask for sustainable palm oil, small
and medium size Indonesian producers who focus on marketing their
products to to India and China may remain free from the incentives
affecting suppliers to Unilever and the European market. Most have only
observer status in the Round Table on Sustainable Palm Oil, choosing to
avoid the expensive and troublesome RSPO certification processes.38
Given that RSPO accreditation is so expensive at this stage – “in the
range of five to 10 per cent of the company’s CPO (crude palm oil)
production cost" – the costs of developing, documenting and certifying
EMSs discourages small and medium sized companies from seeking
certification, especially in developing countries markets such as Indonesia,
34
India and China where there are neither environmentally aware consumers
nor vigorous regulators (News Straits Times, 09/07/2008). This may yet
lead to a market segmentation between a class of “clean” well capitalized
producers who seek to address RSPO criteria and thereby obtain a
premium for selling certified products to developed markets, while the
majority of “dirty” producers continue to sell uncertified product to
developing markets outside of the RSPO framework at a lower price.
There is now such a loose network of institutions and actors involved in
regulating Indonesia’s agro-industrial sector. The fragmentation in
governance arrangements associated with decentralization, and now the
shift to performance based approaches under the umbrella of producer led
organizations such as RSPO, has heightened the legal complexity of state
and “voluntary” industry regulations. The concern is that these networks
and rather disconnected arrangements will fail to provide the policy
coherence required to ensure consistent outcomes, with large numbers of
actors slipping through the cracks. The question is whether Indonesian
regulators, by building on RSPO criteria and indicators that normatively
provide for greater transparency and oversight by government and third
parties, including communities, can integrate existing laws with RSPO
criteria and standards to develop some implementation capacity and
thereby use RSPO to improve district environmental regimes.
Another concern is that these certification processes can also be used by
industries to protect themselves from more stringent standards (Delmas et
35
al 2008). For instance, some companies use the strategy of obtaining ISO
9000 and ISO 14000 series certification for one aspect of their overall
operations, but then, in their public relations, claiming ISO certification for
their whole operation. In the case of rubber production, one company
(PTP III) obtained ISO 14,000 for glove manufacturing. At the same time
this company operates 10 CPO factories with a total capacity of 480
FFB/hr producing as much as 480 m3/hr. For some time none of these
factories have followed the ISO 14000 series.39 However, it is likely that
these certification schemes may well pave the way for the next generation
of more stringent and rigorous standards (Delmas et al, 2008). Further, as
noted earlier, effectiveness of provisions that are currently being
developed for de-certifying a company that becomes lax in its
environmental practices remains uncertain. In addition, the degree to
which the aims of ISO 14001 series (let alone the more recent RSPO
process) have been reached remains relatively underexplored, partly
because environmental information is extremely difficult to obtain (Melnyk
et al., 2003).
Rather than trying to impose post-facto responses to environmental
problems, another policy alternative that is often discussed involves
restructuring outmoded forms of industrialism (Eckersley 1995: 18). Such
managerial approaches, known as “ecological modernization”, seek to
integrate environmental goals into corporate strategy by developing
systematic environmental management strategies as part of production
processes, for instance by taking externalities from one economic
36
production process and using them as raw material inputs for another
(Andersen and Massa, 2000). In the case of oil palm integrating waste
treatment for all type of wastes from an oil palm mill could provide
significant benefits for plantations and reduce the social and environment
costs of pollution. Simple technological innovation can create various
secondary products. If a plantation manager is committed, the cost to the
community could be minimized. There are several uses of palm oil waste.
For instance, plantations can channel liquid waste (known as Palm Oil Mill
Effluent or POME) into cultivation areas in a process of waste use known
as "land application". While land application increases the productivity of
oil palm while reducing the use of fertilizers, it involves relatively high
investment costs and needs to be carried out carefully. Alternatively,
POME processing involving an anaerobic system can also produce biogas
which can substitute for diesel oil (Schuchardt, 2001). Otherwise, charcoal
can be produced from the shell of oil palm fruits for export. Finally,
plantation labourers can mix compost from empty fruit bunches with liquid
waste to produce compost with very high nutrient content that can
substitute for conventional fertilizers that are used, for instance, in
vegetable production(Schuchardt at. al. 2001)..
However, these technologies are expensive. For example, the German
technology for using fresh POM effluent for composting empty fruit bunch
would cost 2 billion rupiah (approx. US$ 180,000). According to an official
in a Provincial Plantation Agency (Dinas Perkebunan), when this method
was discussed with companies involved in oil palm production, they lacked
37
enthusiasm about moving ahead with this technology due to the expense
involved.40 Factories may be particularly reluctant to make the initial
investment in waste treatment companies unless such an investment fits in
with a wider corporate strategy to take up industry standards as a means
of gaining wider market access.
Consequently, better environmental outcomes are more likely to emerge
through application of a range of policy instruments involving varying
levels of state, donor agency and private provision that aim to deal with the
embedded nature of this problem. In the case of the rubber industry this
would involve ensuring the production of clean rubber at the smallholder
level, with a range of policies to pass on higher market prices for clean
rubber right down the supply chain, along with government regulation to
ban reinvestment by rubber factories in machinery to process dirty rubber,
in the long run ensuring that only machines for clean processing can be
used.
CONCLUSION
In examining the logic underlying the series of transformations in the
regulatory regime in Indonesia, we have discussed the intractable and
pervasive institutional problems that weaken traditional bureaucratic
regulation. These include the dependence on investment and taxes from
industry and the collusive patterns of interaction between polluting
industries and local level agencies. Consequently, in the absence of
regulatory deterrence, oil palm and rubber industries long continued to
38
externalize their environmental costs and avoid investing in pollution
control at the expense of the health and well being of surrounding
populations and the global climate.
In theory decentralization should make implementing agencies more
responsive to the needs of local communities and improve the provision of
services, including those to the communities impacted by pollution.
However, the shift represented by decentralization presents its own set of
problems, particularly the difficulty of building the capacity of district
governments. The challenge also remains of making local government
more responsive to local stakeholders by strengthening the lines of
responsibility and accountability in relation to policy implementation and
monitoring. Legal regimes are currently being improved (Nurhuda 2009).
Further reforms are required to provide a clearer elucidation of the
responsibilities and areas of authority of the agencies working at different
levels of government. Regional laws need to ensure that authority over
environmental affairs in autonomous districts and municipalities is
provided to appropriate institutions headed by suitably qualified officials
who have sufficient status and funding.
Performance based approaches that involve assessing production
processes by a firm against sustainability criteria and making access to
particular markets conditional upon adherence to certified standards in the
production process and the minimization of waste can provide significant
incentives for improvement. However, certification processes face a major
39
limitation: as they are voluntary instruments, and many producers may not
sign up, particularly those supplying the large developing markets where
there is no consumer pressure for certified agro-industrial products.
Further, given the size of the agro-industrial sector in Indonesia, even for
suppliers who do sign up to these schemes, the challenge remains that of
providing effective external mechanisms for ensuring the environmental
performance of firms meet the prescribed standards, for instance with the
involvement of auditors, regulators and third parties such as local
communities. The application of technologies that utilize wastes with
economic value offer further possibilities for pollution control. However,
these also depend on the commitment of factories and involve
considerable investments. Larger producers may be able to meet initial
compliance costs and thereby obtain greater benefits through subscribing
to new performance based mechanisms and the technologies that support
them. Yet, smaller factories may be unable or unwilling to development
coherent management systems and make the initial investments. Solving
these deep rooted problems would require technical and financial
incentives from policy organizations, buyers, factories and NGOs that aim
at increasing smallholder incomes and providing incentives for cleaner
production, and introducing appropriate technology at the farm level, as
well as organizing smallholders. Introducing supporting state regulatory
regimes that incorporate the norms and criteria of voluntary regulatory
regimes such as RSPO may help to institutionalize the standards
prescribed by international regimes (such as RSPO and ISO) within the
local context. Further, RSPO norms and criteria could be used in a similar
40
fashion as the PROPER type programs that use a firm's concern about its
reputation to further ramp up pressure to comply with environmental
standards.41
.
We conclude that policy makers need to avoid the temptation of valorizing
either market or state regulatory based to environmental problems. In the
case of oil palm, particular solutions need to be crafted that combine
different policy instruments to face the specific problems associated with
certain sectors of the industry. Despite the intractable problems facing
bureaucratic regulation, the attempt to implement environmental
regulations should not be abandoned because, as we have seen,
voluntary, market orientated and decentralized governance approaches
are unlikely to succeed on their own. Given the constraints facing these
alternatives, legal instruments need to be sharpened to ensure that
companies who operate in the shadow of the law are required to improve
pollution mitigation systems. The state remains a key vehicle for the
supply of public goods and the pursuit of the collective interest in the
environment. Encompassing forms of public participation in decision-
making and enforcement can assist compliance orientated approaches.
The Unilever case demonstrates how NGO coalitions able to work across
national boundaries. Their capacity to shop for the forum where
transnational market chains are most vulnerable may assist in bringing
pressures to bear on actors to implement ‘voluntary’ RSPO criteria and
41
indicators. As Indonesian policy makers have realized that the country’s
lucrative oil palm exports will be subject to international opprobrium unless
they meet RSPO standards, NGO coalitions mobilizing around the non-
compliance of companies to RSPO criteria and indicators are beginning to
affect state policy in the face of the threat of international boycotts to
products containing Indonesian oil palm.42 In this sense public and civil
society organization participation in decision-making and enforcement will
remain critical.
As studies in developed countries also show, regulation – rather than
working as a system of hierarchically imposed, uniformly enforced rules –
primarily functions as a mechanism that interacts with market and civil
society pressures to generate environmental improvement (Kagan et al,
2003). Consequently, bureaucratic regulation and governance
approaches, including the application of market instruments need to be
mutually supportive (Eckersley, 1995; Aalders, 1999). Taken together they
may yet provide hybrid forms of regulation that build upon the reality that
no single agency, actor or institution possesses the capacity to address
“the multiple facets, interdependencies, and scales of environmental
problems” (Lemos and Agrawal, 2006: 311). In the absence of state with
the capacity to implement the required strategies, carefully combined
hybrid forms of regulation may be the only approach to supporting better
outcomes for rural environments.43 Yet, it remains unclear to what degree
such approaches can prevent large groups of suppliers and producers
continuing to externalize environmental costs. For in a fragmented and
42
highly politicized policy context, the problem remains that loose networks
of institutions and actors may fail to provide the policy coherence required
to ensure consistent outcomes. By mixing policy tools and providing for
continual improvement as the state seeks to respond to outside criticism,
incremental improvements that involve integrating these approaches may
move the state to enhancing its capacity for improve policy and
implementation over time.
Acknowledgements
This research was undertaken under the INSELA Research Project on
Environmental Law and Administration in Indonesia at the Van
Vollenhoven Institute, Leiden University and at the Australian National
University under an Australian Research Council grant entitled "Oil Palm
and Agrarian Transition on the Indonesian and Malaysian Frontiers".
Thanks to Adriaan Bedner, Benjamin van Rooij and Piers Gillespie for
comments on earlier versions of this paper.
43
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1 In particular the opening of wetlands for oil palm plantations is associated with peat oxidation
and fires causes large scale methane and carbon emissions (Joosten 2008.). The extension of oil
palm into peat lands is associated with the limited availability of mineral land for large scale
plantation in Sumatra and the failure to apply spatial planning criteria before granting location
permits in these areas (Minayefa 2008). 2 Press reports frequently discuss this ongoing problem. See for instance Sinar Harapan, 22/1/02,
"Bapedalda Sumbar Tegur Keras Pabrik Karet"; Suara Pembaruan, 7/3/99, "Prokasih Sumsel Sulit
Tertibkan Pabrik Yang Cemari Sungai Musi"; Suara Pembaruan, 3/19/99, Pelanggan Keluhkan Air
Produksi PDAM Bengkulu; Suara Pembaruan, 22/7/01 Sungai Siak Tercemar Limbah Industri.
48
3 Based on the technical specified rubber (TSR) standard, Indonesia has developed Standard
Indonesian Rubber (SIR). In Indonesia crumb rubber is given an SIR grade on the basis of its
physical and chemical properties including dirt content, ash content, nitrogen content, volatile
matter, plasticity retention index and wallace plasticity. 4 This has included the growth of private CPO factories without plantation areas which have more
severe impacts on the environment due to the limited area available for waste water treatment and
the inability of these mills to channel their waste water for land application. While a regulation
(UU Perkebunan No 18/2004) forbids the development of factories without plantation areas, the
companies have been able to collaborate with KUD and farmer organization to avoid closure. 5 For an earlier discussion, see Warren, C. and K. Elston (1994).
6 According to Ministry of Environment figures for 2008, seventy industries faced administrative
sanctions for pollution related problems. Although one industry lost its license, and another was
forced to suspend its activities, no factories were closed. Civil litigation was brought against a
further ten cases, while another 33 businesses with industrial licenses faced criminal litigation,
with only five cases culminating in jail sentences (Nurhuda 2009).
7 With a shortage of dry land areas unimpeded by smallholder land rights, and with the opportunity
of offsetting the cost of developing peat lands against “the valuable commercial swamp timber
species extracted before land clearing”, developers have been prepared to open plantations in the
complimentary lands allocated by the state in less fertile peat lands (GEC Malaysia - Peat-Portal,
2001). 8 To overcome this problem, in 2008 the State Ministry for the Environment drafted a new
directive setting out the organizational requirements and expertise required for district EIA
commissions to gain official accreditation to evaluate development proposals. See “Komisi Amdal
Daerah Disusun”, Kompas 26/5/08, 9 On occasion, he argued, this is demonstrated for instance when, in course of developing the EIA,
consultants forget to change the layout to reflect a new factory design. Consultants writing EIA
reports have been known to forget to change the name of the factory on the EIA document that
they are using as a template for a new EIA report. Interview, Environmental Consultant, Medan. 10 The Plantation Agency (Dinas Perkebunan) was been shifted between the Ministry of
Agriculture and the Ministry of Forestry under successive cabinets. Industries must also report the
results of their self monitoring activities every six months in accordance with the monitoring and
management plans set out in the original EIS. 11
Interview Dinas Perindistrian Medan 12
Eg Government Regulation (PP) No. 27, 1999. 13
See sections 25-29, 31-39, of the Environmental law (UU LH No.23/1997). 14
Source: field notes. 15
Alternatively cases can be handled outside court through mediation. See sections 25-29 of the
Environmental law (UU LH No.23/1997). For a discussion of the role of mediation in
environmental disputes, see Nicholson (2005). 16 Interview Dinas Perindistrian Medan. 17
To overcome this problem, in the process of revising the environmental law (UU 23/97)
lawmakers are considering increasing the powers of civil investigators, increasing criminal
sanctions, the responsibilities of the consent authority, as well as revising provisions regarding
transboundary pollution in order to overcome the territorial and administrative constrains that have
worked against pollution control (Hasibuan 2009; Nurhuda 2009). 18 Interview Dinas Perindistrian Medan 19
Interview Dinas Perindistrian Medan 21
Interview, engineer, POM, Lahuhan Batu 22
Interview, Dinas Perkebunan, Medan. 23
See Manor, (1999), Lemos and Agrawal (2006). 24 This framework law was replaced in 2004 by UU 32/2004 with a new implementing regulation
PP 38/2007). The new laws set out very similar environmental responsibilities for district
governments. 25
If environmental impacts are potentially concern more than one districts, the AMDAL
commission is now coordinated at the provincial level, whereas, if potential impacts are limited to
a single districts, the commission is coordinated at the district level (See Kepmen Men LH No 40,
41 & 42 of 2000). The national government coordinates commissions for applications for large
projects with national implications. The final decision for issuing an AMDAL rests with the
Deleted: ¶
49
relevant sectoral Minister and local government, either the Governor or Bupati (head of District
Government). 26
See PP 25/2000. In early 2002, Bapedal ceased to exist as a separate agency, and the state
minister for the environment took over the Bapedal functions. 27
For further discussion, see Warren and McCarthy (2008) and Resosudarmo, B. P., Ed. (2006). 28
Interview with Bapedalda Sumatra Utara 29
Interview LH official 30
Interview, Bapedalda Head, Deli-Serdang 31 Interview with Gapindo 32
Interview, LH section, Tebing Tinggi 33 Interview LH official 34
Government regulations (such as PP No 15/1991 regarding National Standards) prohibited the
export of lowest quality rubber (SIR 50). 35
A certification process (such as RSPO’s) involves a three stage process: first, the
development of standards and criteria for certification; second, an accreditation process that
ensures that the actors carrying out the accreditation are competent and credible; and, third, a
certification process involving a physical audit, the preparation of audit reports and peer
review of the reports under an auditing system that is seen to ensure that the standard have
been met (RSPO, 2007a, 2007b; News Straits Times, 09/07/2008).
36
ISO standards are documented agreements of technical specifications that companies use as
guide lines to ensure that materials and products fit their purpose. In the early 1990s ISO
developed an environmental management standard (ISO 14000 series). The ISO 9000 series was
for quality management to enhance firms’ ability to attain and measure improvements in
performance and to facilitate trade and remove trade barriers (Nash and Ehrenfeld, 1996). 37 ISO certification involves 3 month preparation under a consultancy company and an external
audit every three years. The advantage of having ISO certification is that it gives a company
guaranteed market access because importers don't need to test every shipment (Standard National
Indonesia (SNI) adopts ISO standards). 38 Interview with participants, RSPO annual meeting, December 2008. 39
ISO standards are documented agreements of technical specifications that companies use as
guide lines to ensure that materials and products fit their purpose. In the early 1990s ISO
developed an environmental management standard (ISO 14000 series). The ISO 9000 series was
for quality management to enhance firms’ ability to attain and measure improvements in
performance and to facilitate trade and remove trade barriers (Nash and Ehrenfeld, 1996). 40
Interview, Dinas Perkebunan, Medan 41
The PROPER program rated the compliance status of the polluters and publically disclosed
these ratings, in effect using firms' concerns about their reputation to pressure them to improve
their performance. See Lucas and Djati, (2008).
. 42 In Jambi the provincial government has asked oil palm companies to begin to meet RSPO
criteria and even discussed creating a provincial team to monitor company compliance. The
provincial government also sees RSPO as an opportunity to apply pressure on companies to clean
up river pollution and to enhance the bargaining position and knowledge of farmers. Interview
with provincial NGO, Jambi, March 2009. 43
For a related discussion, see Gunningham et al (1998).